Pola Orbis Holdings (TSE:4927) Is Due To Pay A Dividend Of ¥21.00

The board of Pola Orbis Holdings Inc. (TSE:4927) has announced that it will pay a dividend of ¥21.00 per share on the 8th of September. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

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Pola Orbis Holdings' Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 82% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

The next 12 months is set to see EPS grow by 10.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 117%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Pola Orbis Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥21.75 in 2015, and the most recent fiscal year payment was ¥52.00. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Pola Orbis Holdings might have put its house in order since then, but we remain cautious.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Pola Orbis Holdings' EPS has fallen by approximately 14% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Pola Orbis Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.